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Hudson's Bay Co.

Key Drivers
- Retail Sales
- Sales volume growth (Comparable)
- Acquisitions?
Geographic Divisions
- US
- Canada
- Europe
Business Segments
- Department Store
- Joint Ventures Investments

Revenue Schedule
Total sales = sales per sq. ft x total square footage
Calculate total square footage growth
Assume 2015 sales per sq. ft (every quarter)
Assume sales per sq. ft grow at comparable sales rate
Geographic mix

Hudson's Bay Co.


Inputs and Assumptions
GENERAL
- First year of forecast in financial model:
2016
- 5-year cash flow model discounted to January 31, 2017
- Three scenarios have been used for Inflation, Sales Pricing
and sales volume growth

EQUITY
Stock Price - 09/16/16
Average Stock Price - 2015
Annual Common Dividend Payout
Fully Diluted Shares O/S (MM) - Ja

PRODUCT PRICING
- The product pricing cases used in the model are as follows:
Pricing Case
2016-2020
Terminal Year

OPERATIONS
- Sales per Square Footage
- Gross Leasable Area (000's sq. ft

Base Case
Best Case

Research Forecast
+5%

Avg. of Last 5 Years


Avg. of Last 5 Years

- Rent (MM)

Worst Case

(5%)

Avg. of Last 5 Years

TAXES
- Values are calculated assuming
- Tax rate assumed in the model:

INTEREST RATES AND DEBT COVENANTS


Interest Rates
- Interest rate earned on cash balances:
- Interest rate on the Bank Revolver:
- Interest rate on US Term Loan B:
- Interest rate on Lord & Taylor Mortgage:
- Interest rate on Saks Mortgage:
- Interest rate on Other Term Loans:
- Interest rate on Finance Leases

0.6%
4.8%
3.8%
3.9%
4.4%
4.4%

- Blended CCA Rate assumed in th


- Opening TLCF balance (C$MM):
- Opening UCC balance (C$MM):

VALUATION
- Cost of Equity
- Low end of the discount rate (WA

9.0%

- Low end of the terminal value gr

- The terminal value growth rate r


INVESTMENT IN JOINT VENTURES
Investment in Joint Ventures
Return on Investment in JVs
Assume net earning in joint venture growing at inflation
On
Of

$658.0
$0.0

MINIMUM CASH BALANCE

- This EBITDA Margin is used to ca


- Full cash taxes are paid (ie. no d
- Depreciation is equal to Capex
- No changes in working capital

$40.0

Minimum Cash Balance Required


The Marquee Group
C:\My Documents\Medallion Model.xls

TERMINAL YEAR

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DEPRECIATION
- Depreciation Methodology Used:
- Years remaining for depreciation
- Years used for depreciation of ne

CIRCUIT BREAKER
Circularity in the Model is Currently

Hudson's Bay Co.


Inputs and Assumptions
CAPITAL EXPENDITURES (CAPEX)
- Capex has been assumed at $600 million in 2016 to 2020
- Capex used in the model is maintenance Capex only
- If productivity enhancing (strategic) capex is added, corresponding changes to the model's capacity and/or cost structure
will need to be incorporated
(CDN$ millions)

2016

Freehold Land
Buildings
Leasehold Improvements
Fixtures & Fittings
Assets held under Finance Leases
Total

0.0
0.0
0.0
600.0
0.0
$600.0

2017
0.0
0.0
0.0
600.0
0.0
$600.0

2018
0.0
0.0
0.0
600.0
0.0
$600.0

2019
0.0
0.0
0.0
600.0
0.0
$600.0

2020
0.0
0.0
0.0
600.0
0.0
$600.0

EARNINGS ADJUSTMENTS (PRE-EBITDA)


(CDN$ millions)

2016

2017

2018

2019

2020

Adjustment 1
Adjustment 2
Adjustment 3
Total

0.0
0.0
0.0
$0.0

0.0
0.0
0.0
$0.0

0.0
0.0
0.0
$0.0

0.0
0.0
0.0
$0.0

0.0
0.0
0.0
$0.0

WORKING CAPITAL DAYS


The Marquee Group
C:\My Documents\Medallion Model.xls

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(Days)

2016

Accounts Receivable
Inventories
Accounts Payable

9.2
158.5
67.1

2017
9.2
158.5
67.1

2018
9.2
158.5
67.1

2019
9.2
158.5
67.1

2020
9.2
158.5
67.1

CHANGE IN DEBT AND EQUITY


(CDN$ millions)

2016

US Term Loan B - issue/(repayment)


Lord & Taylor Mortgage - issue/(repayment)
Saks Mortgage - issue/(repayment)
Other Term Loans - issue/(repayment)
Lease Minimum Payment
Common Stock Issuance / (Buy-back)
Stock Option Grants (MM)

The Marquee Group


C:\My Documents\Medallion Model.xls

2017

2018

2019

2020

$0.0
$0.0
$0.0 ($349.0)
$220.0
$0.0
($7.0)
($3.0)
($25.0)
($4.1)

$0.0
$0.0
$0.0
$0.0
($4.5)

$0.0
$0.0
$0.0
$0.0
($4.9)

$0.0
$0.0
$0.0
$0.0
($5.3)

$0.0
0.0

$0.0
0.0

$0.0
0.0

$0.0
3.5

Page 5 of 68

$0.0
0.0

09/17/2016 19:50:39

dson's Bay Co.

uts and Assumptions


$18.06
$18.13
$0.20
189.50

Average Stock Price - 2015


Annual Common Dividend Payout
Fully Diluted Shares O/S (MM) - Jan. 31, 2017

- Sales per Square Footage


- Gross Leasable Area (000's sq. ft)

$285.00
49,133
$756.00

- Values are calculated assuming a share purchase


- Tax rate assumed in the model:
- Blended CCA Rate assumed in the model:
- Opening TLCF balance (C$MM):
- Opening UCC balance (C$MM):

26.5%
20.0%
$1,032.0
$0.0

- Low end of the discount rate (WACC) range:

8.8%
5.7%

- Low end of the terminal value growth rate:

3.6%

- The terminal value growth rate range is 3.6% to 5.1%

- This EBITDA Margin is used to calculate EBITDA


- Full cash taxes are paid (ie. no deferred taxes)
- Depreciation is equal to Capex
- No changes in working capital

The Marquee Group


C:\My Documents\Medallion Model.xls

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- Depreciation Methodology Used:


- Years remaining for depreciation of existing assets:
- Years used for depreciation of new assets:

Straight Line
11 years
20 years

son's Bay Co.

s and Assumptions

changes to the model's capacity and/or cost structure


Term
0.0
0.0
0.0
600.0
0.0
$600.0

The Marquee Group


C:\My Documents\Medallion Model.xls

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09/17/2016 19:50:39

2021
$0.0
$0.0
$0.0
$0.0
($5.8)

The Marquee Group


C:\My Documents\Medallion Model.xls

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09/17/2016 19:50:39

Hudson's Bay Co.


Economic and Pricing Scenarios
SCENARIO SWITCH:

2016

2017

2018

2019

2020

Term

Cost Inflation

2.0%

2.0%

2.0%

2.0%

2.0%

2.0%

Base Case
Best Case
Worst Case

2.0%
1.0%
2.5%

2.0%
1.0%
2.5%

2.0%
1.0%
2.5%

2.0%
1.0%
2.5%

2.0%
1.0%
2.5%

2.0%
1.0%
2.5%

2.5%

2.5%

2.5%

2.3%

2.3%

2.3%

2.5%
2.5%
2.5%

2.5%
2.5%
2.3%

2.5%
2.5%
2.1%

2.3%
2.5%
1.9%

2.3%
2.5%
1.9%

2.3%
2.5%
1.9%

50533

51502

51684

51917

52186

52311

50533
53060
48007

51502
54077
48927

51684
54268
49100

51917
54513
49321

52186
54795
49577

52311
54926
49695

58.0%

58.0%

57.5%

57.5%

57.5%

57.0%

58.0%
59.5%
60.0%

58.0%
59.5%
60.0%

57.5%
59.5%
60.0%

57.5%
59.5%
60.0%

57.5%
59.5%
60.0%

57.0%
59.5%
60.0%

ECONOMIC SCENARIOS

SALES SCENARIOS
Comparable Sales Growth Rate
Base Case
Best Case
Worst Case

Gross Leasable Area


Base Case
Best Case +5.0%
Worst Case -5.0%

Cost of Sales
Base Case
Best Case
Worst Case

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C:\My Documents\Medallion Model.xls

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Hudson's B

Revenue Sc

Pricing
Sales per Square Footage

(CDN$/sq. ft)

Capacity
Total Square Footage

(000's sq. ft)

Sales Volume
Comparable Sales Growth

(%)

Revenue
Gross Revenue
Revenue from Acquisitions
Net Revenue

(C$ MM)
(C$ MM)
(C$ MM)

Hudson's Bay

Costs of Product

Total Square Footage


Cost Inflation
COSTS PER SQUARE FOOTAGE
Variable Costs
Cost of sales
Total Variable Costs
Fixed Costs
SG&A

(000's sq. ft)


(%)

% of Revenue
% of Revenu

per sq. ft

Total Fixed Costs


Total Costs

COSTS IN MILLIONS OF CDN$


Variable Costs
Cost of sales
Total Variable Costs

per sq. ft
per sq. ft

(C$ MM)
(C$ MM)

Fixed Costs
SG&A
Total Fixed Costs

(C$ MM)
(C$ MM)

Total Costs

(C$ MM)

Hudson's B

Income Sta

Sales Volume

(000's units)

Revenue
Gross Revenue
Net Revenue

(C$ MM)
(C$ MM)

Cost of Sales
S,G & A
Total Costs

(C$ MM)

Adjustments
EBITDA

(C$ MM)

Gain (Loss) on Contribution of assets to Joint Ventures


Gain (Loss) on Sales of Investments in Joint Ventures
Share of Net Gain (Loss) in Joint Ventures
Dilution Gain from Investment in Joint Venture
Sales on Queen Street
Depreciation
EBIT

(C$ MM)

Interest Expense
EBT

(C$ MM)

Current Income Taxes (Benefits)


Deferred Income Taxes (Benefits)
Total Income Benefits (Taxes)

(C$ MM)

(C$ MM)
(C$ MM)

(C$ MM)

(C$ MM)

(C$ MM)

(C$ MM)

(C$ MM)
(C$ MM)

Net Income

(C$ MM)

Average Diluted Shares O/S


Earnings per Share

(MM's)
(C$ / share)

Normalization adjustments
Gain on contribution of assets to joint ventures
Gain on sale of investments in joint ventures
Gain on sale of Queen street Sale
Dilution gain from investments in joint ventures
Acquisition and integration related expenses and finance costs
Joint venture transaction costs
Restructuring and other
North Amerciacn realignment initiative
Financing related adjustments
Amortization of inventory purchase price accounting adjustments
Home outfitters onerous lease provision
Rforeign exhange adjustment
Adjustments to sahre of net loss in joint ventures
Loyalty Zellers adjustments
Tax related adjustments
Total normalization adjustments
Normalized Net Income
Earnings per Share Normalized

(C$ / share)

EBITDAR
Rent, net (included in S,G & A Expenses)

(C$ MM)
(C$ MM)

Margins
EBITDAR Margin
EBITDA Margin
EBIT Margin
Return on Equity

Hudson's Bay

Cash Flow Statem


(C$ Millions)
Operating Activities
Net Income
Depreciation & Amortization
Deferred Income Taxes
Share of Net Gain (Loss) in Joint Ventures
Changes in working capital
Operating Cash Flow

Investing Activities
CAPEX
Other
Investing Cash Flow

Financing Activities
Revolver Issuance / (Repayment)
Term Debt Issuance / (Repayment)
Finance Lease Issuance / (Repayment)
Common Shares Issuance/ (Buy-Back)
Common Dividends
Financing Cash Flow

Change in the Cash Position


Beginning Cash
Ending Cash

Hudson's Bay

Balance Sheet
(C$ Millions)

ASSETS
Cash
Accounts Receivable
Inventory
Other
Total Current Assets
Net PP&E
Intangible Assets
Investment in Joint Ventures
Deferred Tax Assets
Pension and employee benefits
Other
Total Assets

LIABILITIES AND EQUITY


Revolver
Term Loan
Finance Leases
Accounts Payable
Other

Total Current Liabilities


Term Loan
Finance Leases
Pension and employee benefits
Deferred Tax Liabilities
Investment in Joint Venture
Other
Total Long Term Liabilities
Total Liabilities
Contributed Surplus
Accumulated Other Comprehensive Income
Common Shares
Retained Earnings
Shareholder's Equity
Total Liabilities and Equity
Check

Hudson's Bay

Depreciation Sche
(C$ Millions)

Years Remaining on Existing Assets:


Depreciation Years on New Assets:

11 years
20 years

Depreciation to Existing Assets


CAPEX
2016
2017
2018
2019
2020

$600.0
$600.0
$600.0
$600.0
$600.0

Total Depreciation

Hudson's Bay

Income Tax Sched


(C$ Millions)
Tax Rate

26.5%

Earnings Before Taxes (as is on I/S)


Add Back Accounting Depreciation
Deduct CCA for Tax Purposes
Earnings Before TLCF after CCA
Tax Loss Carry Forward Schedule
Existing TLCF - Initial Balance
Existing TLCF Used
Earnings after use of Existing TLCF
Newly Created TLCF - Beginning
Newly Created TLCF Used (Added)
Newly Created TLCF - Ending
Remaining Existing TLCF
Total TLCF Available
Taxable Income (after CCA and TLCF)
Accounting Taxes (26.5%)
Taxes as Appearing on Income Statement
Current Tax (26.5% of B)
Increase (Decrease) in Deferred Income Taxes
Total Income Taxes (Same as Accounting Taxes Above)
CCA Schedule
Blended CCA Rate

20.0%

UCC Beginning
Plus: New Capex
1/2 of New Capex
UCC After New Capex (1/2 Year)
Less: CCA Available and Used
UCC Ending

Hudson's Bay

Working Capital Sch


(C$ Millions)

Days per Year

(days)

Income Statement Items


Net Revenue
Cost of Sales
Days In
Accounts Receivable
Inventories
Accounts Payable
Account Balances
Accounts Receivable
Inventories
Accounts Payable
Net Working Capital
Change in Working Capital

(C$ MM)
(C$ MM)

(days)
(days)
(days)

(C$ MM)
(C$ MM)
(C$ MM)
(C$ MM)
(C$ MM)

Hudson's Bay

Debt and Interest Sc


(C$ Millions)

FINANCING COMPONENT
Cash
Amount Outstanding - Beginning
Change in Cash
Amount Outstanding - Ending
Interest Rate
Annual Interest Income

Minimum Cash Balance Required


Cash Available for (Required from) Revolver
Revolver
Operating Cash Flow
Investing Cash Flow
Mandatory Debt Repayments
Dividends
FCF After Mandatory Debt Repayment and Dividend
Revolver Outstanding - Beginning
Additions / (Repayments)
Revolver Outstanding - Ending

Interest Rate
Annual Interest Expense
Finance Leases
Amount Outstanding - Beginning
Additions / (Repayments)
Amount Outstanding - Ending
Interest Rate
Annual Interest Expense
US Term Loan B (due Sep 2022)
Amount Outstanding - Beginning
Additions / (Repayments)
Amount Outstanding - Ending
Interest Rate
Annual Interest Expense
Lord & Taylor Mortgage (due Sep 2017)
Amount Outstanding - Beginning
Additions / (Repayments)
Amount Outstanding - Ending
Interest Rate
Annual Interest Expense
Saks Mortgage (due Dec 2034)
Amount Outstanding - Beginning
Additions / (Repayments)
Amount Outstanding - Ending
Interest Rate
Annual Interest Expense

Other Term Loans


Amount Outstanding - Beginning
Additions / (Repayments)
Amount Outstanding - Ending
Interest Rate
Annual Interest Expense
Net Interest Expense

Hudson's Bay

Operating & Finance Leas

(C$ Millions)

OPERATING LEASE ARRANGEMENTS

Minimum payments under non-cancellable operating leases


Fiscal year
2013
2014
2015
2016
2017
2018
2019
2020
Thereafter
Total minimum lease payments
Capitalisation of operating leases:
Years remaining after 2020
Est. annual payment
Fiscal year
2013
given
2014
given
2015
given
2016
given
2017
given
2018
given
2019
given
2020
given
2021
estimated
2022
estimated
2023
estimated
2024
estimated
2025
estimated
2026
estimated
2027
estimated
2028
estimated
2029
estimated
2030
estimated
2031
estimated
2032
estimated
2033
estimated
Total minimum lease payments
Avg interest rate

PV at avg interest rate


Implied interest expense
Operating lease depreciation expense
Operating lease payment
EBIT
Add: Operating Lease Payment
Less: Depreciation expense
EBIT adjusted
FINANCE LEASE ARRANGEMENTS
Less than 1 year
Between 1 and 5 years
Thereafter
Total minimum lease payments
Less: imputed interest
Total finance lease obligations
Lease payment year 1 (average)
Lease payment year 2-5 (average)
No. of annual lease payments after year 5
Total annual lease payments
Average annual lease payment (for calculating IRR)
IRR
On balance sheet debt
Capitalised operating leases
Total debt
Equity
Total capital

Hudson's Bay

Shareholders' Equity S
(C$ Millions)

Common Shares
Amount Outstanding - Beginning
New Issuance / (Buy-Back)
Amount Outstanding - Ending
Dividend Payout Rate
Net Income

Common Dividend

Retained Earnings
Amount Outstanding - Beginning
Net Income
Common Dividend
Amount Outstanding - Ending

Shares Outstanding
Cost of Equity
Average Stock Price
Fully Diluted Shares O/S (MM) - Beginning
New Issuance / (Buy-Back)
Stock Option Grants
Fully Diluted Shares O/S (MM) - Ending
Average Fully Diluted Shares O/S

Hudson's Bay

Financial Summ
(C$ Millions)
Financial Summary
Gross Profit
EBITDA
EBIT
EBIT adjusted
Capital Expenditures
Total Debt
Net Debt
Total Debt - HBC Retail Operations
Net Debt - HBC Retail Operations
Interest Expense
Total Market Capitalization
Total Book Capitalization
Net Revenue
EBIT
EBT
Net Income
Total Assets
Dupont Analysis
ROE
Leverage
ROA
Asset Turnover

(C$ MM)
(C$ MM)
(C$ MM)
(C$ MM)
(C$ MM)
(C$ MM)
(C$ MM)
(C$ MM)
(C$ MM)
(C$ MM)
(C$ MM)
(C$ MM)

(C$
(C$
(C$
(C$
(C$

MM)
MM)
MM)
MM)
MM)

Net Profit Margin


Operating Profit Margin
Tax Burden
Interest Burden
Financia Data
Revenue Growth
Gross Margin
EBITDA Margin
EPS
EPS Normalized
ROE
ROA
Interest Coverage
Debt/Equity

Hudson's Bay Co.


Revenue Schedule

2014A

2015A

254.64

227.18

285.00

290.70

296.51

302.44

308.49

32,081.00

49,133.00

50,533.27

51,501.58

51,684.01

51,917.23

52,186.16

2.70%

2.50%

2016F

2.50%

2017F

2.50%

2018F

2.50%

2019F

2.30%

2020F

2.30%

8,169.0

11,162.0

14,762.0

15,345.8

15,708.2

16,063.2

16,469.4

8,169.0

11,162.0

14,762.0

15,345.8

15,708.2

16,063.2

16,469.4

Hudson's Bay Co.


Costs of Production

2014A
32,081.0

2015A
49,133.0

2016F

2017F

2018F

2019F

2020F

50,533.3
2.00%

51,501.6
2.00%

51,684.0
2.00%

51,917.2
2.00%

52,186.2
2.00%

59.9%
59.9%

59.5%
59.5%

58.00%
58.0%

58.00%
58.0%

57.50%
57.5%

57.50%
57.5%

57.50%
57.5%

86.0

82.8

108.5

110.7

112.9

115.0

117.3

86.0

82.8

108.5

110.7

112.9

115.0

117.3

$86.6

$83.3

$109.1

$111.3

$113.5

$115.5

$117.8

4,893.0
4,893.0

6,638.0
6,638.0

8,561.98
8,562.0

8,900.56
8,900.6

9,032.19
9,032.2

9,236.35
9,236.3

9,469.88
9,469.9

2,759.0
2,759.0

4,066.0
4,066.0

5,484.94
5,484.9

5,701.84
5,701.8

5,836.48
5,836.5

5,968.40
5,968.4

6,119.30
6,119.3

$7,652.0

$10,704.0

$14,046.9

$14,602.4

$14,868.7

$15,204.8

$15,589.2

Hudson's Bay Co.


Income Statement
2014A

2015A

2016F

Projected
2017F

2018F

2019F

2020F

8,169.0
8,169.0

11,162.0
11,162.0

14,762.0
14,762.0

15,345.8
15,345.8

15,708.2
15,708.2

16,063.2
16,063.2

16,469.4
16,469.4

4,893.0
2,759.0
7,652.0

6,638.0
4,066.0
10,704.0

8,562.0
5,484.9
14,046.9

8,900.6
5,701.8
14,602.4

9,032.2
5,836.5
14,868.7

9,236.3
5,968.4
15,204.8

9,469.9
6,119.3
15,589.2

0.0
517.0

0.0
458.0

0.0
715.1

0.0
743.4

0.0
839.5

0.0
858.5

0.0
880.2

0.0
0.0
0.0
0.0
308.0
344.0
481.0

168.0
516.0
(139.0)
164.0
0.0
460.0
707.0

0.0
45.0
(2.0)
4.0
0.0
475.0
287.1

0.0
0.0
25.0
0.0
0.0
505.0
263.4

0.0
0.0
25.5
0.0
0.0
535.0
330.0

0.0
0.0
26.0
0.0
0.0
565.0
319.5

0.0
0.0
26.5
0.0
0.0
580.0
326.7

262.0
219.0

188.0
519.0

173.6
113.6

169.2
94.2

172.4
157.6

175.2
144.3

177.5
149.2

(19.0)
0.0
(19.0)

132.0
0.0
132.0

0.0
30.1
30.1

0.0
25.0
25.0

97.0
(55.2)
41.8

102.2
(64.0)
38.2

92.9
(53.3)
39.5

$238.0

$387.0

$83.5

$69.2

$115.8

$106.0

$109.7

186.0
$1.28

189.5
$2.04

193.0
$0.43

193.0
$0.36

193.0
$0.60

193.0
$0.55

193.0
$0.57

(261)
84
(4)
47
24
10
(12)
(18)
(7)
(137)

(134.00)
(333.00)
(98.00)
73.00
31.00
12.00
23.00
37.00
53.00
1.00
(9.00)
32.00
(20.00)
(332.00)

$101.0

$55.0

$83.5

$69.2

$115.8

$106.0

$109.7

$0.54

$0.29

$0.43

$0.36

$0.60

$0.55

$0.57

774.0
257.0

888.0
430.0

1,471.1
756.0

1,499.4
756.0

1,595.5
756.0

1,614.5
756.0

1,636.2
756.0

9.5%
6.3%
5.9%
9.6%

8.0%
4.1%
6.3%
12.5%

10.0%
4.8%
1.9%
2.7%

9.8%
4.8%
1.7%
2.2%

10.2%
5.3%
2.1%
3.5%

10.1%
5.3%
2.0%
3.1%

9.9%
5.3%
2.0%
3.1%

2015A

2016F

2017F

Projected
2018F

2019F

2020F

18.0

83.5
475.0
30.1
(2.0)
(75.1)
511.5

69.2
505.0
25.0
25.0
(106.3)
517.8

115.8
535.0
(55.2)
25.5
(42.1)
579.1

106.0
565.0
(64.0)
26.0
(60.0)
573.0

109.7
580.0
(53.3)
26.5
(61.1)
601.8

Hudson's Bay Co.


Cash Flow Statement
2014A

547.0

448.0

(600.0)
45.0
(555.0)

(600.0)
0.0
(600.0)

(600.0)
0.0
(600.0)

(600.0)
0.0
(600.0)

(600.0)
0.0
(600.0)

(848.0)

(138.0)

(444.0)
213.0
(25.0)
0.0
(38.6)
(294.6)

348.0
(352.0)
(4.1)
0.0
(38.6)
(46.7)

64.0
0.0
(4.5)
0.0
(38.6)
20.9

70.5
0.0
(4.9)
0.0
(38.6)
27.0

42.1
0.0
(5.3)
0.0
(38.6)
(1.8)

147.0
21.0
168.0

168.0
339.0
507.0

(338.1)
507.0
168.9

(128.9)
168.9
40.0

(0.0)
40.0
40.0

0.0
40.0
40.0

0.0
40.0
40.0

2016F

2017F

Projected
2018F

441.0

Hudson's Bay Co.


Balance Sheet
2014A

2015A

2019F

2020F

168.0
212.0
2,319.0
100.0
2,799

507.0
512.0
3,415.0
194.0
4,628.0

168.9
369.5
3,707.1
194.0
4,439.5

40.0
385.1
3,864.3
194.0
4,483.4

40.0
394.2
3,921.5
194.0
4,549.7

40.0
403.1
4,010.1
194.0
4,647.2

40.0
412.2
4,100.3
194.0
4,746.4

4,606.0
1,313.0
0.0
240.0
149.0
15.0
$9,122.0

5,154.0
1,774.0
658.0
253.0
166.0
16.0
$12,649.0

5,279.0
1,774.0
613.0
253.0
166.0
16.0
$12,540.5

5,374.0
1,774.0
613.0
253.0
166.0
16.0
$12,679.4

5,439.0
1,774.0
613.0
253.0
166.0
16.0
$12,810.7

5,474.0
1,774.0
613.0
253.0
166.0
16.0
$12,943.2

5,494.0
1,774.0
613.0
253.0
166.0
16.0
$13,062.4

242.0
4.0
19.0
945.0
934.0

444.0
7.0
25.0
1,494.0
1,426.0

0.0
352.0
4.1
1,568.5
1,426.0

348.0
0.0
4.5
1,635.0
1,426.0

412.0
0.0
4.9
1,659.2
1,426.0

482.4
0.0
5.3
1,696.7
1,426.0

524.5
0.0
5.8
1,734.9
1,426.0

2,144.0

3,396.0

3,350.6

3,413.5

3,502.1

3,610.5

3,691.2

2,723.0
136.0
189.0
656.0
0.0
800.0
4,504.0

2,729.0
500.0
681.0
887.0
27.0
1,330.0
6,154.0

2,597.0
495.9
681.0
917.1
20.0
1,330.0
6,041.0

2,597.0
491.4
681.0
942.0
20.0
1,330.0
6,061.5

2,597.0
486.5
681.0
886.8
20.0
1,330.0
6,001.4

2,597.0
481.2
681.0
822.8
20.0
1,330.0
5,932.1

2,597.0
475.4
681.0
769.5
20.0
1,330.0
5,873.0

6,648.0

9,550.0

9,391.6

9,474.9

9,503.4

9,542.5

9,564.1

60.0
316.0
1,420.0
678.0
2,474.0

86.0
564.0
1,420.0
1,029.0
3,099.0

86.0
569.0
1,420.0
1,073.9
3,148.9

86.0
594.0
1,420.0
1,104.5
3,204.5

86.0
619.5
1,420.0
1,181.7
3,307.2

86.0
645.5
1,420.0
1,249.2
3,400.7

86.0
672.0
1,420.0
1,320.3
3,498.3

$9,122.0

$12,649.0

$12,540.5

$12,679.4

$12,810.7

$12,943.2

$13,062.4

0.000

0.000

0.000

0.000

0.000

0.000

0.000

2016F

2017F

2018F

2019F

2020F

Hudson's Bay Co.


Depreciation Schedule
2014A

2015A

$344.0

$460.0

$344.0

$460.0

Hudson's Bay Co.

$460.0

$460.0

$460.0

$460.0

$460.0

15.0

30.0
15.0

30.0
30.0
15.0

30.0
30.0
30.0
15.0

30.0
30.0
30.0
30.0

$475.0

$505.0

$535.0

$565.0

$580.0

Income Tax Schedule


2014A

2015A

2016F

2017F

2018F

2019F

2020F

$113.6

$94.2

$157.6

$144.3

$149.2

475.0
60.0
528.6

505.0
168.0
431.2

535.0
254.4
438.2

565.0
323.5
385.8

580.0
378.8
350.4

1,032.0
528.6
0.0

503.4
431.2
0.0

72.3
72.3
365.9

0.0
0.0
385.8

0.0
0.0
350.4

0.0
0.0
0.0

0.0
0.0
0.0

0.0
0.0
0.0

0.0
0.0
0.0

0.0
0.0
0.0

503.4
503.4

72.3
72.3

0.0
0.0

0.0
0.0

0.0
0.0

$0.0

$0.0

$365.9

$385.8

$350.4

30.1

25.0

41.8

38.2

39.5

0.0
30.1
30.1

0.0
25.0
25.0

97.0
(55.2)
41.8

102.2
(64.0)
38.2

92.9
(53.3)
39.5

2016

2017

2018

2019

2020

0.0
600.0
300.0
300.0
60.0
$540.0

540.0
600.0
300.0
840.0
168.0
$972.0

972.0
600.0
300.0
1,272.0
254.4
$1,317.6

1,317.6
600.0
300.0
1,617.6
323.5
$1,594.1

1,594.1
600.0
300.0
1,894.1
378.8
$1,815.3

Hudson's Bay Co.


Working Capital Schedule
2014A
365

2015A
365

2016F
366

2017F
365

2018F
365

2019F
365

2020F
366

8,169.0
4,893.0

11,162.0
6,638.0

14,762.0
8,562.0

15,345.8
8,900.6

15,708.2
9,032.2

16,063.2
9,236.3

16,469.4
9,469.9

9.5
173.0
70.5

16.7
187.8
82.1

9.2
158.5
67.1

9.2
158.5
67.1

9.2
158.5
67.1

9.2
158.5
67.1

9.2
158.5
67.1

212.0
2,319.0
945.0
1586.0

512.0
3,415.0
1,494.0
2433.0

369.5
3,707.1
1,568.5
2508.1

385.1
3,864.3
1,635.0
2614.4

394.2
3,921.5
1,659.2
2656.5

403.1
4,010.1
1,696.7
2716.5

412.2
4,100.3
1,734.9
2777.6

($847.0)

($75.1)

($106.3)

($42.1)

($60.0)

($61.1)

2016F

2017F

2018F

2019F

2020F

507.0
(338.1)
$168.9

168.9
(128.9)
$40.0

40.0
0.0
$40.0

40.0
0.0
$40.0

40.0
0.0
$40.0

0.6%
$2.0

0.6%
$0.6

0.6%
$0.2

0.6%
$0.2

0.6%
$0.2

40.0
467.0

40.0
128.9

40.0
0.0

40.0
0.0

40.0
0.0

Hudson's Bay Co.

Debt and Interest Schedule


2014A

2015A

$507.0

511.5
(555.0)
188.0
(38.6)
$105.9

$444.0

444.0
(444.0)
$0.0

517.8
(600.0)
(356.1)
(38.6)
($476.9)
0.0
348.0
$348.0

579.1
(600.0)
(4.5)
(38.6)
($64.0)

573.0
(600.0)
(4.9)
(38.6)
($70.5)

601.8
(600.0)
(5.3)
(38.6)
($42.1)

348.0
64.0
$412.0

412.0
70.5
$482.4

482.4
42.1
$524.5

4.8%
$10.7

$525.0

$617.0

$349.0

$1,760.0

$10

4.8%
$8.4

4.8%
$18.3

4.8%
$21.6

4.8%
$24.3

525.0
(25.0)
$500.0

500.0
(4.1)
$495.9

495.9
(4.5)
$491.4

491.4
(4.9)
$486.5

486.5
(5.3)
$481.2

9.0%
$45.9

9.0%
$44.6

9.0%
$44.2

9.0%
$43.8

9.0%
$43.4

617.0
0.0
$617.0

617.0
0.0
$617.0

617.0
0.0
$617.0

617.0
0.0
$617.0

617.0
0.0
$617.0

3.8%
$23.1

3.8%
$23.1

3.8%
$23.1

3.8%
$23.1

3.8%
$23.1

349.0
0.0
$349.0

349.0
(349.0)
$0.0

0.0
0.0
$0.0

0.0
0.0
$0.0

0.0
0.0
$0.0

3.9%
$13.4

3.9%
$6.7

3.9%
$0.0

3.9%
$0.0

3.9%
$0.0

1,760.0
220.0
$1,980.0

1,980.0
0.0
$1,980.0

1,980.0
0.0
$1,980.0

1,980.0
0.0
$1,980.0

1,980.0
0.0
$1,980.0

4.4%
$82.1

4.4%
$86.9

4.4%
$86.9

4.4%
$86.9

4.4%
$86.9

0.0
0.0
$0.0

0.0
0.0
$0.0

0.0
0.0
$0.0

10.0
(7.0)
$3.0

3.0
(3.0)
$0.0

4.4%
$0.3

4.4%
$0.1

4.4%
$0.0

4.4%
$0.0

4.4%
$0.0

$173.6

$169.2

$172.4

$175.2

$177.5

Hudson's Bay Co.

ating & Finance Leases Schedule

2014A

143.0
133.0
123.0
110.0
99.0
1,064.0
1,672.0

11 years
96.7

143.0
133.0
123.0
110.0
99.0
96.7
96.7
96.7
96.7
96.7
96.7
96.7
96.7
96.7
96.7
96.7

1,672.0
8.4%

2015A

968.0
989.0
956.0
916.0
885.0
11,459.0
16,173.0

13 years
881.5

968.0
989.0
956.0
916.0
885.0
881.5
881.5
881.5
881.5
881.5
881.5
881.5
881.5
881.5
881.5
881.5
881.5
881.5
16,173.0
5.1%

2016F

2017F

2018F

2019F

2020F

989.0
956.0
916.0
885.0
11,459.0

956.0
916.0
885.0
11,459.0

916.0
885.0
11,459.0

885.0
11,459.0

11,459.0

15,205.0

14,216.0

13,260.0

12,344.0

11,459.0

13 years

13 years

13 years

13 years

13 years

881.5

881.5

881.5

881.5

881.5

989.0
956.0
916.0
885.0
881.5
881.5
881.5
881.5
881.5
881.5
881.5
881.5
881.5
881.5
881.5
881.5
881.5
15,205.0

956.0
916.0
885.0
881.5
881.5
881.5
881.5
881.5
881.5
881.5
881.5
881.5
881.5
881.5
881.5
881.5
14,216.0

916.0
885.0
881.5
881.5
881.5
881.5
881.5
881.5
881.5
881.5
881.5
881.5
881.5
881.5
881.5
13,260.0

885.0
881.5
881.5
881.5
881.5
881.5
881.5
881.5
881.5
881.5
881.5
881.5
881.5
881.5
12,344.0

881.5
881.5
881.5
881.5
881.5
881.5
881.5
881.5
881.5
881.5
881.5
881.5
881.5
11,459.0

5.1%

5.1%

5.1%

5.1%

5.1%

940.7
127.9
128.9
256.8

10,519.5
78.9
64.1
143.0

481.0
256.8
(128.9)
608.9

707.0
143.0
(64.1)
785.9

30.0
55.0
437.0
522.0
(367.0)
155.0

64.0
194.0
1,603.0
1,861.0
(1,336.0)
525.0

30.0
13.8
31.8
36.8
14.2
8.7%

64.0
48.5
33.1
38.1
48.9
9.0%

81%
19%

10,085.3
533.8
434.2
968.0

9,608.1
511.8
477.2
989.0

9,139.6
487.5
468.5
956.0

8,687.4
463.8
452.2
916.0

8,243.2
440.8
444.2
885.0

287.1
968.0
(434.2)
820.9

263.4
989.0
(477.2)
775.1

330.0
956.0
(468.5)
817.5

319.5
916.0
(452.2)
783.2

326.7
885.0
(444.2)
767.5

2016F

2017F

2018F

2019F

2020F

3,705.0
10,519.5
14,224.5
3,422.4
17,646.9

Hudson's Bay Co.

hareholders' Equity Schedule


2014A

2015A

1,420.0

1,420.0
0.0
$1,420.0

1,420.0
0.0
$1,420.0

1,420.0
0.0
$1,420.0

1,420.0
0.0
$1,420.0

1,420.0
0.0
$1,420.0

46.2%
83.5

55.8%
69.2

33.3%
115.8

36.4%
106.0

35.2%
109.7

$38.6

1,029.0

189.50

1,029.0
$83.5
(38.6)
$1,073.9

$38.6

1,073.9
$69.2
(38.6)
$1,104.5

$38.6

1,104.5
$115.8
(38.6)
$1,181.7

$38.6

1,181.7
$106.0
(38.6)
$1,249.2

$38.6

1,249.2
$109.7
(38.6)
$1,320.3

8.8%
$18.13

8.8%
$19.73

8.8%
$21.48

8.8%
$23.37

8.8%
$25.44

189.5
0.0
3.5
193.0

193.0
0.0
0.0
193.0

193.0
0.0
0.0
193.0

193.0
0.0
0.0
193.0

193.0
0.0
0.0
193.0

191.3

193.0

193.0

193.0

193.0

2016F

2017F

2018F

2019F

2020F

Hudson's Bay Co.


Financial Summary
2014A
$3,276.0
$517.0
$481.0
$608.9
0.0
3,124.0
2,956.0

262.0
3,422.4
5,430.0
8,169.0
481.0
219.0
$238.0
$9,122.0

2015A
$4,524.0
$458.0
$707.0
$785.9
0.0
3,705.0
3,198.0
1,596.0
1,089.0
188.0
3,422.4
6,297.0
11,162.0
707.0
519.0
$387.0
$12,649.0

$6,200.1
$715.1
$287.1
$820.9
600.0
3,449.0
3,280.1
1,120.0
951.1
173.6
3,422.4
6,429.0
14,762.0
287.1
113.6
$83.5
$12,540.5

$6,445.2
$743.4
$263.4
$775.1
600.0
3,440.9
3,400.9
1,460.9
1,420.9
169.2
3,422.4
6,605.4
15,345.8
263.4
94.2
$69.2
$12,679.4

$6,676.0
$839.5
$330.0
$817.5
600.0
3,500.4
3,460.4
1,520.4
1,480.4
172.4
3,422.4
6,767.6
15,708.2
330.0
157.6
$115.8
$12,810.7

$6,826.9
$858.5
$319.5
$783.2
600.0
3,566.0
3,526.0
1,586.0
1,546.0
175.2
3,422.4
6,926.7
16,063.2
319.5
144.3
$106.0
$12,943.2

$6,999.5
$880.2
$326.7
$767.5
600.0
3,602.7
3,562.7
1,622.7
1,582.7
177.5
3,422.4
7,061.0
16,469.4
326.7
149.2
$109.7
$13,062.4

6.6%
1.9
3.6%
1.0

1.3%
2.0
0.7%
1.2

1.1%
1.9
0.5%
1.2

1.7%
1.9
0.9%
1.2

1.5%
1.9
0.8%
1.2

1.6%
1.9
0.8%
1.3

3.5%
6.3%
0.7
0.7

0.6%
1.9%
0.7
0.4

0.5%
1.7%
0.7
0.4

0.7%
2.1%
0.7
0.5

0.7%
2.0%
0.7
0.5

0.7%
2.0%
0.7
0.5

36.6%
40.5%
4.1%
$2.04
$0.29
6.6%
3.6%
3.8
0.6

32.3%
42.0%
4.8%
$0.43
$0.43
1.3%
0.7%
1.7
0.5

4.0%
42.0%
4.8%
$0.36
$0.36
1.1%
0.5%
1.6
0.5

2.4%
42.5%
5.3%
$0.60
$0.60
1.7%
0.9%
1.9
0.5

2.3%
42.5%
5.3%
$0.55
$0.55
1.5%
0.8%
1.8
0.5

2.5%
42.5%
5.3%
$0.57
$0.57
1.6%
0.8%
1.8
0.5

Term.

308.49

52,186.16

2.30%

16,469.4
16,469.4

Term.
52,186.2
2.00%

57.00%
57.0%

117.3

117.3
$117.8

9,387.53
9,387.5

6,119.30
6,119.3
$15,506.8

Term.

16,469.4
16,469.4
9,387.5
6,119.3
15,506.8
0.0
962.5
0.0
0.0
27.1
0.0
0.0
600.0
389.6
0.0
389.6
103.2
0.0
103.2

$286.3

$286.3

1,718.5
756.0

10.4%
5.8%

481.2
(5.8)
$475.4

617.0
0.0
$617.0

0.0
0.0
$0.0

1,980.0
0.0
$1,980.0

0.0
0.0
$0.0

Cost of Equity
Risk Free Rate
Beta
Market Risk Premium
Cost of Equity (CAPM)
Earnings per Share 2015
Normalized Dividend Payout
Annual Dividend Normalized
Share Price
Dividend Yield
Growth Rate
Cost of Equity (DGM)
Cost of Debt
Risk Premium
Cost of Equity (BYPRP)

WACC
MV of Equity
Cost of Equity (Average)
Weight of Equity
BV of Debt
Cost of Debt @ tax rate=26.5%
Weight of Debt
WACC

1.09%
1.32
6.25%
9.32%
2.13
34%
0.72
$18.06
4.01%
4.60%
8.61%
5.07%
3.50%
8.57%

3,422
8.84%
48.02%
3,705
3.73%
51.98%
6.18%

Risk free rate is the latest Government of Canada 10yr bond yield
Beta is raw beta from Bloomberg
Market Risk Premium from Dr. Aswath Damodran, Stern School of Business at NYU updated

Normalized Dividend Payout ratio based on peer average as HBC has a low payout ratio wh
Growth rate assumed to be LT nominal GDP growth rate (1992-2014 Avg Real GDP growth 2

Cost of debt based on actual 2015 financials


Book value of debt has been used as the company relies on bank borrowing and has no pub
Risk Premium assumed 3.5% based on analytical judgement
Cost of equity is the average of CAPM, DGM, and BYPRP.

ol of Business at NYU updated July 2016

HBC has a low payout ratio while its in an expansion phase


2-2014 Avg Real GDP growth 2.6%pa plus Bank of Canada inflation target 2%pa)

ank borrowing and has no publicly traded debt

Hudson's Bay Co.

Income Tax Schedule for Calculat


(C$ Millions)
Tax Rate

26.5%

Earnings Before INTEREST and Taxes


Add Back Accounting Depreciation
Deduct CCA for Tax Purposes
Earnings Before TLCF after CCA
Tax Loss Carry Forward Schedule
Existing TLCF - Initial Balance
Existing TLCF Used
Earnings after use of Existing TLCF
Newly Created TLCF - Beginning
Newly Created TLCF Used (Added)
Newly Created TLCF - Ending
Remaining Existing TLCF
Total TLCF Available
Taxable Income (after CCA and TLCF)
Accounting Taxes (26.5%)
Taxes as Appearing on Income Statement
Current Tax (26.5% of B)
Increase (Decrease) in Deferred Income Taxes
Total Income Taxes (Same as Accounting Taxes Above)
CCA Schedule
Blended CCA Rate

20.0%

UCC Beginning
Plus: New Capex
1/2 of New Capex
UCC After New Capex (1/2 Year)
Less: CCA Available and Used
UCC Ending

Hudson's Bay C

Levered Free Cash Flow S


(C$ Millions)

Levered Free Cash Flow


Net Income
Join Ventures
Depreciation
Deferred Income Taxes
Changes in working capital
CAPEX
Net Borrowing
Levered Free Cash Flow

Interest expense
Net Borrowing
FCFE
check

son's Bay Co.

hedule for Calculating UFCF


2016F

2017F

2018F

2019F

2020F

$287.1

$263.4

$330.0

$319.5

$326.7

475.0
60.0
702.1

505.0
168.0
600.4

535.0
254.4
610.6

565.0
323.5
561.0

580.0
378.8
527.9

1,032.0
702.1
0.0

329.9
329.9
270.5

0.0
0.0
610.6

0.0
0.0
561.0

0.0
0.0
527.9

0.0
0.0
0.0

0.0
0.0
0.0

0.0
0.0
0.0

0.0
0.0
0.0

0.0
0.0
0.0

329.9
329.9

0.0
0.0

0.0
0.0

0.0
0.0

0.0
0.0

$0.0

$270.5

$610.6

$561.0

$527.9

76.1

69.8

87.4

84.7

86.6

0.0
76.1
76.1

71.7
(1.9)
69.8

161.8
(74.4)
87.4

148.7
(64.0)
84.7

139.9
(53.3)
86.6

2017F

2018F

2019F

2020F

2016F
0.0
600.0
300.0
300.0
60.0
$540.0

540.0
600.0
300.0
840.0
168.0
$972.0

972.0
600.0
300.0
1,272.0
254.4
$1,317.6

1,317.6
600.0
300.0
1,617.6
323.5
$1,594.1

1,594.1
600.0
300.0
1,894.1
378.8
$1,815.3

Hudson's Bay Co.

ed Free Cash Flow Schedule


2016F

2017F

2018F

2019F

2020F

Term.

83.5
(47.0)
475.0
30.1
(75.1)
(600.0)
(256.0)
(389.5)

69.2
(25.0)
505.0
25.0
(106.3)
(600.0)
(8.1)
(140.3)

115.8
(25.5)
535.0
(55.2)
(42.1)
(600.0)
59.5
(12.4)

106.0
(26.0)
565.0
(64.0)
(60.0)
(600.0)
65.6
(13.4)

109.7
(26.5)
580.0
(53.3)
(61.1)
(600.0)
36.8
(14.5)

286.3
(27.1)
600.0
0.0
0.0
(600.0)
0.0
259.3

173.6
(256.0)
(389.5)
0.0

97.5
(8.1)
(140.3)
0.0

107.5
59.5
(12.4)
(0.0)

128.8
65.6
(13.4)
0.0

130.4
36.8
(14.5)
(0.0)

0.0
0.0
259.3
0.0

Hudson's Bay

DCF Valuation Sch


(C$ Millions, except per share amounts)
WACC
3.6%
5.7%

PV of Cash Flows
PV of Terminal Year
Enterprise Value
Less Net Debt (1/31/17)
Equity Value
Shares O/S (MM) - (1/31/17)
Equity Value per Share

6.2%

PV of Cash Flows
PV of Terminal Year
Enterprise Value
Less Net Debt (1/31/17)
Equity Value
Shares O/S (MM) - (1/31/17)
Equity Value per Share

6.7%

PV of Cash Flows
PV of Terminal Year
Enterprise Value
Less Net Debt (1/31/17)
Equity Value
Shares O/S (MM) - (1/31/17)
Equity Value per Share

7.2%

PV of Cash Flows
PV of Terminal Year
Enterprise Value
Less Net Debt (1/31/17)
Equity Value
Shares O/S (MM) - (1/31/17)
Equity Value per Share

141
9,715
$9,856

1%
99%
100%

3,280
$6,576
189.50
$34.70
139
7,669
7,808

2%
98%
100%

3,280
$4,527
189.50
$23.89
137
6,290
6,427

2%
98%
100%

3,280
$3,146
189.50
$16.60

134
5,299
5,434
3,280
$2,153
189.50
$11.36

2%
98%
100%

Hudson's Bay Co.


DCF Valuation Schedule

4.1%
141
12,788
12,929

Terminal Value Growth Rate


4.6%
1%
99%
100%

141
18,701
18,842

5.1%
1%
99%
100%

141
34,790
34,931

3,280
$9,648

3,280
$15,562

3,280
$31,651

189.50
$50.92

189.50
$82.12

189.50
$167.02

139
9,511
9,650

1%
99%
100%

139
12,519
12,658

1%
99%
100%

139
18,308
18,447

3,280
$6,370

3,280
$9,378

3,280
$15,167

189.50
$33.61

189.50
$49.49

189.50
$80.04

137
7,508
7,645

2%
98%
100%

137
9,312
9,449

1%
99%
100%

137
12,257
12,394

3,280
$4,365

3,280
$6,169

3,280
$9,114

189.50
$23.03

189.50
$32.55

189.50
$48.09

134
6,159
6,294

2%
98%
100%

134
7,352
7,487

2%
98%
100%

134
9,118
9,253

3,280
$3,013

3,280
$4,206

3,280
$5,973

189.50
$15.90

189.50
$22.20

189.50
$31.52

0%
100%
100%

1%
99%
100%

1%
99%
100%

1%
99%
100%

Hudson's Bay

FCFE Valuation Sch


(C$ Millions, except per share amounts)
Ke
3.6%
8.3%

PV of Cash Flows
PV of Terminal Year
Enterprise Value
Equity Value
Shares O/S (MM) - (1/31/17)
Equity Value per Share

8.8%

PV of Cash Flows
PV of Terminal Year
Enterprise Value
Equity Value
Shares O/S (MM) - (1/31/17)
Equity Value per Share

9.3%

PV of Cash Flows
PV of Terminal Year
Enterprise Value
Equity Value
Shares O/S (MM) - (1/31/17)
Equity Value per Share

9.8%

PV of Cash Flows
PV of Terminal Year
Enterprise Value
Equity Value
Shares O/S (MM) - (1/31/17)
Equity Value per Share

(529)
3,819
$3,290

-16%
116%
100%

$3,290
189.50
$17.36
(527)
3,383
2,857

-18%
118%
100%

$2,857
189.50
$15.07
(525)
3,025
2,501

-21%
121%
100%

$2,501
189.50
$13.20

(522)
2,726
2,204
$2,204
189.50
$11.63

-24%
124%
100%

Hudson's Bay Co.


FCFE Valuation Schedule

4.1%
(529)
4,270
$3,741

Terminal Value Growth Rate


4.6%
-14%
114%
100%

(529)
4,841
$4,312

5.1%
-12%
112%
100%

(529)
5,590
$5,061

$3,741

$4,312

$5,061

189.50
$19.74

189.50
$22.76

189.50
$26.71

(527)
3,741
3,214

-16%
116%
100%

(527)
4,182
3,656

-14%
114%
100%

(527)
4,742
4,215

$3,214

$3,656

$4,215

189.50
$16.96

189.50
$19.29

189.50
$22.24

(525)
3,314
2,790

-19%
119%
100%

(525)
3,664
3,140

-17%
117%
100%

(525)
4,097
3,572

$2,790

$3,140

$3,572

189.50
$14.72

189.50
$16.57

189.50
$18.85

(522)
2,964
2,441

-21%
121%
100%

(522)
3,247
2,725

-19%
119%
100%

(522)
3,590
3,067

$2,441

$2,725

$3,067

189.50
$12.88

189.50
$14.38

189.50
$16.19

-10%
110%
100%

-12%
112%
100%

-15%
115%
100%

-17%
117%
100%

Hudson's Bay Co.

Alternate DCF Valuation Schedul


(C$ Millions)

WACC

6.0%

Terminal EBITDA Multiple

6.0 x

PV of 5 yr Cash Flows
PV of Terminal Year
Enterprise Value
Less Net Debt (1/31/17)
Equity Value
Shares O/S (MM) - (1/31/17)
Equity Value per Share
Stock Price - 09/16/16

C$MM
$139
$4,192
$4,331
3,280
$1,051
189.50
$5.55
$18.06

Implied TV Growth Rate

Enterpri

W
A
C
C

$4,331
6.0%
6.5%
7.0%
7.5%
8.0%

1.2%

Equity Valu

W
A
C
C

554.6%
6.0%
6.5%
7.0%
7.5%
8.0%

dson's Bay Co.


DCF Valuation Schedule

Enterprise Values - Sensitivity Table


Terminal Year EBITDA Multiple
5.0 x

5.5 x

6.0 x

6.5 x

7.0 x

Equity Value per Share - Sensitivity Table


Terminal Year EBITDA Multiple
5.0 x

5.5 x

6.0 x

6.5 x

7.0 x

Hudson's Bay Co.


Sum-of-the-Parts Valua
HBC Retail Operations
HBC Sum-of-the-Parts Valuation

$ million
Retail EBITDA 2016F
Rent income/(expense) - HBC Real Estate
Retail EBITDA 2016F after adjustments
Multiple
Cap rate
Enterprise Value
Less: Net Debt
Equity Value
HBC ownership
HBC equity value
Shares o/s (million)
HBC equity value per share
% of total equity value
Supporting schedules
Net debt calculation
Short-term loans and borrowings
Long-term loans and borrowings
US Term Loan B
Lord & Taylor Mortgage
Saks Mortgage
Other loans
Long-term loans and borrowings

715
(543)
172
7.25

1,247
951
###
296
100.00%
296
190
1.56
4%

617
349
1,980
3
2,949
###

Total finance lease obligations


Total debt
Cash
Net debt

500
3,449
(169)
3,280

Total debt (ex-Saks/ex-L&T)


Net debt (ex-Saks/ex-L&T)

1,120
951

Exchange rates
USD/CAD
EUR/CAD
Peer group EV/EBITDA
HBC CN Equity
JCP US Equity
M US Equity
JWN US Equity
DDS US Equity
KSS US Equity
TJX US Equity
MKS LN Equity
MEDIAN EX HBC

1.32
1.5

5.56
11.56
6.20
6.70
4.44
5.41
10.87
7.25
6.70

Assumptions
Rent Income for HBC Real Estate Assets is from Corporate Investor Presentation Spring 2016. HBC had
time of creation of its JVs or while mortgaging these assets.
Rent expense to HBC Real Estate is a proportionate rent based on HBC's ownership of asset estimated
ownership of the property.
Rent expense to 3rd Party Landlords is from Corporate Investor Presentation Spring 2016
Retail EBITDA 2016F Multiple is based on peer group median
Cap rate is from Corporate Investor Presentation Spring 2016. HBC had used these estimates to value
mortgaging these assets.
Net Debt of JVs is based on latest 1Q2016 financial statements
HBC ownership of JVs and properties is based on latest 1Q2016 financial statements
Adjustments to convert HBC Net Income and SHE to HBC standalone retail operation
Subtract from Net Income and SHE:
Rent on stores owned 100% or through JV
Add to Net Income and SHE:
Interest expense on loans related to the property

Net adjustment before tax


Tax shield
Tax rate
Net adjustment after tax

Hudson's Bay Co.


m-of-the-Parts Valuation
HBS JV

355

HBC Real Estate Assets


RioCan JV
Saks Fifth Ave Lord & Taylor
NYC Flagship Fifth Ave NYC
Flagship

100

183

40

5.90%
6,017

5.08%
1,969

3.75%
4,880

5.00%
800

3,164
2,853
65.00%
1,854
190
9.79
27%

550
1,419
89.30%
1,267
190
6.68
19%

1,980
2,900
100.00%
2,900
190
15.30
43%

349
451
100.00%
451
190
2.38
7%

158

349
1,980
3,081
3,081

3,239
(75)
3,164

543
543

1,980

349

551
(1)
550

1,980
1,980

349
349

Total Real
Estate

678

4.96%
13,665
6,043
7,622
6,472
190
34.15
96%

resentation Spring 2016. HBC had used these estimates to value the assets at the

BC's ownership of asset estimated by us. This is not a cash expense due to JV or full

entation Spring 2016

had used these estimates to value the assets at the time of creation of its JVs or while

ncial statements

ndalone retail operation


(231)

(89)

(183)

(40)

155
4.8%

26
4.8%

87
4.4%

13
3.9%

(76)

(63)

(96)

(27)

(20)
26.5%

(17)
26.5%

(25)
26.5%

(7)
26.5%

(56)

(46)

(71)

(20)

Total

14,913
check
6,994
7,919
6,769
190
35.72
100%

check
-

(543)

282

(261)
(69)

(192)

Canada
US
Europe

Sales
Total Square Footgae
2957000000 18556.03 18556026
6336000000 13897.97 13897974
3738000000
16679 16679000
13031000000
49133000

Hudson
Lord & taylor
Saks
OFF 5th
Home Outfiter
HBC Europe

90
50
38
90
62
131

90
50
38
77
67
0

Hudson
Lord & taylor
Saks
OFF 5th
Home Outfiter
HBC Europe

16006
6898
4741
2595
2214
16679

16123
6898
4499
2117
2444
0

Avg Square Footgae per store (in


Hudson
177.84444444
Lord & taylor
137.96
Saks
124.76315789
OFF 5th
28.833333333
Home Outfiter
35.709677419
HBC Europe
127.32061069

90 CAN
49 US
41
71
69 CAN
0 EUR

159.3552
455.8938
2 455.8938
3 455.8938
159.3552
265.2189

16123
6790
4787
1960
2515
0

thousands)
179.1444 179.1444
137.96 138.5714
118.3947 116.7561
27.49351 27.60563
36.47761 36.44928

177844.4
137960
124763.2
28833.33
35709.68
127320.6

179144.4
137960
118394.7
27493.51
36477.61
0

Sales/square footage
159.3552
455.8938
224.1142
265.2189

Home Outfitter is going to decr ,m


Hudson's Bay store stay the same, with decreasing footage
5 Saks in Canada throughout 24 months, assuming "normal" Saks si
25 OFF 5th in Canada, 7 OFF 5th in Europe
13 Hudson's Bay in Europe over 24 months

Hudson
Lord & taylor
Saks
OFF 5th
Home Outfiter
HBC Europe
Hudson
Lord & taylor
Saks
OFF 5th
Home Outfiter
HBC Europe

179144.4
138571.4
116756.1
27605.63
36449.28
0

1300

Hudson
Lord & taylor
Saks
OFF 5th
Home Outfiter
HBC Europe
Total

2015
90
50
38
90
62
131
461
177844.4
137960
124763.2
28833.33
35709.68
127320.6

2016
90
50
40
99
62
138
479
177844.4
137960
124763.2
28833.33
35709.68
127320.6

2017
90
50
41
103
61
144
489
177844.4
137960
124763.2
28833.33
35709.68
127320.6

16006000 16006000 16006000


6898000 6898000 6898000
4741000 4990526 5115289
2595000 2854500 2969833
2214000 2214000 2178290
16679000 17570244 18334168
49133000 50533271 51501581
2.85%
1.92%
49133 50533.27 51501.58

reasing footage
ssuming "normal" Saks size

2018
90
50
42
105
61
144
492
177844.4
137960
124763.2
28833.33
35709.68
127320.6

2019
90
50
43
110
60
144
497
177844.4
137960
124763.2
28833.33
35709.68
127320.6

2020
90
50
44
115
60
144
503
177844.4
137960
124763.2
28833.33
35709.68
127320.6

2021
90
50
45
115
60
144
504
177844.4
137960
124763.2
28833.33
35709.68
127320.6

16006000
6898000
5240053
3027500
2178290
18334168
51684011
0.35%
51684.01

16006000
6898000
5364816
3171667
2142581
18334168
51917231
0.45%
51917.23

16006000
6898000
5489579
3315833
2142581
18334168
52186161
0.52%
52186.16

16006000
6898000
5614342
3315833
2142581
18334168
52310924
0.24%
52310.92